Contrary to popular belief, ​self-employed people​ can get a ​mortgage​ just like everyone else. If you’re self-employed, you have access to the same range of competitive mortgages and interest rates as applicants in full-time employment. You just have to ​tick certain boxes​ to verify your income to lenders and reassure them that you can repay your mortgage, that’s all.

There are mortgage lenders out there who specialise in dealing with self-employed people. However, many mainstream lenders regularly lend to self-employed people anyway.

There’s actually no such thing as a “self-employed mortgage.” In the past, self-employed people could get a ​self-certification mortgage​, which allowed you to state your income without actually providing the documentation to prove it. However, these were discontinued in the UK in 2011 following the ​2008 financial crash​.

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In addition to the ​standard requirements​ like identification, a utility bill (for proof of address) and a deposit, self-employed people have to provide lenders with certain information that other applications don’t in order to verify their income.

Different mortgage lenders may ask for different things from self-employed applicants. However, you’ll generally need to provide the following:

• 2 to 3 years’ worth of accounts​ — Lenders will typically only accept accounts that have been certified by a chartered accountant. However, mortgage lenders who specialise in dealing with self-employed people may only ask for 1 to 2 years’ worth of accounts.
• SA302s ​– An ​SA302​ is a form you receive from ​HMRC​ after you’ve submitted your self assessment tax return. It shows your total income for that given tax year, as well as how much tax you owe. Most lenders will ask to see SA302s for the past 2 to 3 years.
• Tax Year Overview ​– This form, which you can print out via your HMRC online account, verifies that the information provided on your SA302 is correct. Most lenders will ask to see ​Tax Year Overviews​ for the past 2 to 3 years.

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Once a mortgage lender has received the documentation above and are able to verify your income, they then calculate your ​mortgage affordability​. In other words, they figure out how much money they can loan you based on your earnings.

Lenders will typically assess your income in one of the following ways:

• Average income​ — Lenders will look at your last 2 to 3 years’ worth of earnings and calculate an average in come. For example, if you earned £20,000 in year one, £25,000 in year two and £30,000 in year three, your average income will be £25,000.
• Lowest or Recent Year ​– Some lenders might base your mortgage affordability on your lowest-earning year or your most recent year, especially if your income drastically varies from year to year. However, this could reduce the amount of money you can borrow.
• Limited Company​ — If you operate your self-employed business as a ​limited company​ (where your personal bank account is separate from your business bank accounts), a lender might take your personal salary, your dividends or your retained profits in the company.

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• Use an accountant​ — Some lenders won’t consider your application unless your accounts have been signed off by a ​certified or chartered accountant​. However, it’s worth noting that while accountants help you to minimise your declared income so you pay less tax, this can have an adverse effect when applying for a mortgage.
• Provide as much documentation as you can​ — The more information you provide to a lender, the better. In addition to your past earnings, showing evidence of repeat business or work that you have lined up in the future can help to reassure a lender that you can afford to meet your mortgage repayments.
• Put down a bigger deposit — ​As with any mortgage application, the bigger the deposit you put down, the more likely you are to get approved and the lower interest rates you will be offered.
• Get your finances in order — ​Be organised, have all the necessary paperwork ready for lenders to look at, resolve any outstanding debts, limit your outgoings in the run up to getting a mortgage (these will be assessed by lenders when calculating your mortgage affordability) and improve your ​credit score​.

As you can see, the process of securing a mortgage as a self-employed person is not impossible, but it can be slightly more complex compared to if you were in full-time employment. Every lender is different when it comes to self-employed applicants and there are many scenarios that can make applying for a mortgage a bit trickier — for example, if the status of your company has recently changed or you’ve switched between full-time employment and self-employment.

As a self-employed individual, it’s important that you speak to the experts before applying for a mortgage. At ​Green Mortgage Services​, our friendly, professional and experienced financial advisors can help you to find a lender that will cater to your specific situation and secure the best possible mortgage deals for you. We’re Cheshire mortgage brokers who pride ourselves on providing an excellent service and guiding our customers through the entire process, making it as stress-free as possible.

If you’re looking for a self-employed mortgage in Chester, ​get in touch with us today.

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